Yup, It's The Left That Isn't That Smart

The Ignorance and Sheer Bigotry of Lefty Journalists
Thursday, May 31, 2007
Things just seem to get worse and worse. A university student told me that she had been advised to use Beyond Right and Left as a source for her assignment. Needless to say, the site is run by a lefty academic. (The student told me that her lecturer had never advised her to visit a conservative site). This lefty was whining that the "Right's dismissal of critics as 'elites' who are out of touch with 'the battlers'" is baseless. He then quotes Geoffrey Barker, a Sydney Morning Herald journalist, as saying that the Right's accusation is "an extraordinary charge coming from neo-liberal fundamentalists whose privileged lives rarely bring them close to anyone who has had to 'battle" for anything'."
Unfortunately Barker's counter charge contains a grain of truth. For the multimillionaire Hugh Morgan to go on Television and state that those on the minimum wage are making too much money is not only stupid it is also deeply offensive. Nevertheless, Barker is even worse: this is the same lefty journalist who accused his fellow Australians of "racism" and leading a "swinish life". (Katherine Betts, The Great Divide, Duffy & Snellgrove, 1999, p.186) In my opinion this exposed Barker as a bigoted smear-mongering liar.
The following article was written by me and was published in The New Australian in May 1999 with the title A socialist journalist bags laissez faire and calls for tax increases.
Geoffrey Barker has once again given us the benefit of his economic illiteracy. According to him "the old theory of laissez-faire economics" held that government should redistribute wealth to give "the affluent the spur of more money and the poor the lash of their own poverty (Following the GST Slaves").* This is a vicious libel. If it were otherwise Barker would have cheerfully named those classical economists who supported this view. Instead, he quoted the socialist Galbraith's** sarcastic comment about horses, oats and sparrows. Ascribing callous and even vicious views to the classical school is typical of fundamentalist leftists like Barker. Nevertheless, he has once again alerted us to his ideological bigotry and shocking ignorance of the history of economic thought.
The first thing one should realise is that in a free market one can only obtain wealth through voluntary exchange, either by earning it or inheriting it. No free marketeer, classical or otherwise, ever supported government action to take from the poor to give to the rich, despite the snide insinuations of the likes of Barker. As Professor Edwin Cannan said of Adam Smith: "[His] sympathies, indeed, seem to have been wholly with the industrial wage-earner, and especially with the poorest". (William H. Hutt, The Theory of Collective Bargaining 1930 -1975, Institute of Economic Affairs, 1975, p. 16).
The same applied to the other classical economists. For instance, Col. Robert Torrens who emphatically stat that "it is of paramount importance, that wages should be permanently high". (On Wages and Combination, Longman, Rees, Orme, Brown, Green, & Longman, 1834). Their sympathy for labourers was made clear by their concern that taxation could become oppressive, especially for the poor.
Unlike Barker they were acutely aware that taxation hinders capital accumulation and that beyond a certain point it will even lead to capital consumption and hence falling living standards. Mill put it very well when he wrote:
Over-taxation, carried to a sufficient extent, is quite capable of ruining the most industrious community, especially when it is in any degree arbitrary, so that the payer is never certain how much or how little he shall be allowed to keep; or when it is so laid on as to render industry and economy a bad calculation. (John Stuart Mill, Principles of Political Economy, University of Toronto Press 1965, pp. 822-23)
Barker gives every indication that he believes taxation has no effect on wealth creation and makes the preposterous assumption that taxation does not affect behaviour or growth. For example, the 1981 and 1986 Reagan tax cuts saw a significant increase in tax contributions from the top 0.5 per cent of taxpayers as they reported more income as their income rose. In other words, the tax cut made it worthwhile to report more income which in turn led to higher tax payments. However, the Reagan experience was not unique.
When Kennedy visited West Germany in 1961 Chancellor Ludwig Erhard impressed on him the need to avoid British-type tax rates that punished initiative and wealth creation. Preferring the advice of the very successful Erhard to that of the socialist Galbraith, the 1963-1965 Kennedy tax cuts were implemented and marginal rates cut by 23 per cent.
The result: personal savings which had been declining leapt from an annual rate of 2 per cent to 9 per cent, business investment rose significantly, per capita disposable-income jumped and the per centage of Americans living below the poverty line dropped from 22 per cent to 13 per cent by 1968. Perhaps more significantly, the tax take took off. This is what happens when you ignore the advice of socialists.
But there was nothing knew here. Between 1921 and 1925 the Secretary of the Treasury, Andrew Mellon, persuaded Harding, Coolidge and Congress to cut taxes four times from a top rate of 4 per cent to 70 per cent to a range of 1.5 per cent to 25 per cent. Despite dire predictions to the contrary by the then likes of Barker and Galbraith tax revenues rose, most of which came from the top income groups. The per centage of taxes paid by the $100,000 plus earners (an enormous amount in those days) rose from 28.8 per cent in 1921 to 48.8 per cent in 1925.*** But left-wing journalists like Barker are not interested in unearthing let alone discussing facts like these. To them taxation is a means to punish the 'rich' and the economically successful. Anyway, even if we assume that wage earners behaviour does not change with changes in tax rates it would still not support Barker's case for milking people who earn more than him to give to those who earn less so that he can feel better about himself.
Assuming entrepreneurs remained as diligent and as alert as before their activities would still be severely curbed by heavy taxes. What few realise is that such burdens are really taxes on capital accumulation. Curbing this process might not impoverish all entrepreneurs but it will make the masses much poorer. Genuine entrepreneurs are an economy's real driving force. But Barker's sneering response is to attack Smith's invisible hand, caustically referring to it as a "Utopian theory".
Smith's metaphor**** was based on observation, Mr Barker, not fantasy. It epitomises the market process that coordinates the hundreds of millions of decisions that are made in the market place each day; bringing together consistent plans while signalling the failure of others; coordinating an infinite amount of ever changing discrete and incomplete pieces of information conveying ideas about expectations, technical knowledge, changing tastes; using prices to transmit knowledge of shortages, surpluses, expected profits and losses, and to allocate factors to their most valued use.
Now Barker does not deny that the tax system needs reforming. But his idea of reform amounts to an envy-driven "soak-the-rich policy". (Mill called envy "that most anti-social and odious of all passions", On Liberty, Oxford University, 1984, p. 96). Quoting the leftish Bernie Fraser, former Reserve Bank Governor (the one who let the money supply explode in the 1980s) Barker tells us that "tax deductions, exemptions, rebates and concessions given to companies and mainly wealthy individuals" had a value of $21 billion. (Of course, we not given a definition of "wealthy individuals" nor did Fraser or Barker call for the abolition of the Churches tax-exempt status.)
This is class-war rhetoric dressed up as concern for the poor. Deductions, rebates, concessions, etc, are created by governments to change economic behaviour. For example, rebates on superannuation are designed to increase savings, while negative gearing is intended to expand the stock of rental accommodation. But you don't get a hint of this from Barker. Nor does he consider the possibility that eliminating these loopholes might actually see very little increase in tax revenues. In addition, it escaped his attention that loopholes come into existence to try and compensate for the effects of high tax rates. Moreover, politicians like loopholes because it allows them to buy votes from targeted groups.
What this boils down to is that left-wing ideologues like Barker have nothing to contribute to any economic debate.
1. The noted British socialist historian A. J. P. Taylor held similar views about economics, stating that: "This was the greatest revolutionary discovery of the twentieth century: that there are so-called natural economic laws; everything, even human beings, had to be subordinated to the 'price mechanism', that terrible Moloch to which old-fashioned economists still bow down" (The Listener, 20 March 1947). This was when socialist Britain was suffering an enormous range of government induced shortages and living standards had not even recovered to pre-war levels. At the same time, the Moloch-worshipping Americans were undergoing a boom and living standards were rising.
2. Galbraith is one of Barker's intellectual heroes. The same Galbraith who supported the Berlin Wall for its "contribution to world peace." The very same Galbraith who supported the murderous Mao Tse Tung. I reckon this in itself tells much about Barker. The same Barker who accused fellow Australians of "racism" and leading a "swinish life", of being "fatuously materialistic" and wallowing in "vulgarity". He obviously share's Galbraith's patrician-like contempt for the masses.
3. It might be objected by the better informed - of which Barker will never be a member - that monetary expansion could account for the increase in tax revenues etc. However, the results were too quick and the magnitudes too large. And it certainly could not account for the steep drop in the poverty level that took place in the 1960s.
4. It seems that the brilliant metaphor the invisible hand originated with the English author Joseph Granville in his The Vanity of Docmatising 1661.
Note: The valiant Mr Barker has ignored every request to defend his accusations. He, like the rest of his left-wing colleagues, clearly lacks the intellectual and moral courage to defend his ideological views.